Sun, Nov 10, 2019 - Page 14 News List

Wall Street pushes past trade war confusion to rise

COST OF BUSINESS:One portfolio manager has increased the percentage of funds he keeps in mutual funds and cash, saying confidence has made stocks too expensive


The US stock market on Friday capped another week of healthy gains, but it ended on more of a befuddled note than a bang as confusion about a US-China trade war hung over the market.

Stocks wobbled between small gains and losses throughout the day amid conflicting signals about the progress being made by US and Chinese negotiators.

US President Donald Trump on Friday said that he has not agreed to roll back any tariffs, just a day after a Chinese official said that the two sides had agreed to do just that if talks progress.

Stocks and bond yields dipped immediately after Trump told reporters at the White House: “I haven’t agreed to anything.”

However, after flip-flopping throughout the day, the S&P 500 on Friday turned higher in the last hour of trading and closed at a record 3,093.08, up 7.90 points, or 0.3 percent. That was a jump of 0.9 percent from 3,066.91 on Nov. 1 and the fifth straight week of gains for the index, matching its longest winning streak in the past two years.

The Dow Jones Industrial Average on Friday edged up 6.44 points, or less than 0.1 percent, to 27,681.24, surging 1.2 percent from a close of 27,347.36 a week earlier.

The NASDAQ on Friday gained 40.80 points, or 0.5 percent, to 8,475.31, a 1.1 percent increase from a close of 8,386.40 on Nov. 1.

The Russell 2000 index of smaller company stocks on Friday rose 4.87 points, or 0.3 percent, to 1,598.86, gaining 0.6 percent from 1,589.33 a week earlier.

“The general tone of the market will continue to be very cautiously optimistic,” TD Ameritrade Holding Corp chief market strategist J.J. Kinahan said.

Even with the conflicting signals on the trade war, momentum has seemed to be in the direction of a stopgap agreement.

Wall Street hopes only that it will keep the trade war from worsening: Another round of US tariffs on Chinese goods is scheduled to begin next month.

Investors are not expecting a grand bargain anytime soon that solves all the problems between the world’s two largest economies.

Meanwhile, economic reports have been encouraging and have shown the job market remains strong. Interest rates are low following three cuts by the US Federal Reserve and corporate profits have not been as bad as Wall Street feared.

Rising confidence can be found not only in record-high stock prices, but also in a sharp rise for US Treasury yields. When investors feel less need for safety, they sell government bonds, and when Treasury prices fall, their yields rise.

The 10-year Treasury yield climbed to 1.94 percent, from 1.92 percent late on Thursday and a low of 1.5 percent last month.

Not only are yields on the rise, so is the gap between short and long-term Treasuries. That is seen as a vote of confidence in the US economy by the bond market.

Confidence might have gotten so high that stock prices have become too expensive, Villere & Co portfolio manager George Young said.

He sees so few stocks attractively priced that he now has 15 percent of his clients’ money at mutual funds and separately managed account sitting in cash. In June, when worries about the economy and trade war were higher, Young had only 5 percent in cash given the many bargains available.

“I wouldn’t say I’m negative on the market, but when stocks get ahead of themselves, it’s incumbent upon me to balance against the long term,” Young said.

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